Reimagining Capitalism

In June we discussed financial terrorism and the impact of bad actors on the economy and influencing future policies and actions. We concluded that the closer you got to the details of capitalism and the way it worked – the more questions emerged about what capitalism means and how it really functions. At our August meeting (August 25, Panera Bread Company, Bethel Rd., 6:30 pm) we will discuss the topic “Re-imagining Capitalism.”

One way to think of the capitalist model is “greed, constrained.” It is true that capitalism is based on trading goods and services for value – at a rate that is limited only by “what the market will bear.” As a system that must be governed and taxed, it is constrained by laws and regulations that protect both business and customer from dishonesty and misrepresentation. Capitalists depend on public goods – police and fire protection, transportation systems, political and military cover, etc. – and taxes are levied to generate the funds to provide those services.

From that base, however, ideas and biases and priorities and goals get twisted up quickly. As the elements of capitalism have grown from hard goods traded in person to the complexity of stocks, bonds, indices and other vehicles – the creation of definitions and boundaries has become a highly political process.

But those discussions only scratch the surface of a “re-imagining” of the financial strategy. What is the objective of capitalism? What is the ultimate goal? Many would say maximizing profit. But it turns out that this may be way to short-sighted.

Those who evaluate different social structures of capitalism in society have noted, for example, that so-called “family” businesses often have different goals than mere wealth accumulation. Family business may be less concerned about actual corporate profit than they are about employing family members, or providing for family member young or old.

The non-profit corporation is another alternate form of capitalism – the corporation agrees to pursue a purpose for the public good, and to re-invest any excess revenues (otherwise known as profits in the traditional corporate world) for that purpose. The idea is that no individual person profits from the activities of the corporation – it is totally dedicated to the public good. In return for that consideration, our law provides tax benefits. There is no limit to how big a non-profit corporation can be, or how much money it can make – only how those excess revenues are disposed of.

Recently a new business category has emerged as an increasing number of states recognize something called the “low-profit limited liability company” – L3C – which is “for profit” but “unlike a for-profit business, the primary focus of the L3C is not to make money, but to achieve socially beneficial aims, with profit making as a secondary goal. The L3C thus occupies a niche between the for-profit and charitable sectors.” (Wikipedia, http://en.wikipedia.org/wiki/L3C)

While still somewhat controversial and not uniformly accepted, the L3C concept does introduce the concept of values other than monetary profits into the goals of a corporate entity. The problem becomes score-keeping. To the extent that money represents the “score” – how can the achievement of some soft social good be measured? How does the L3C know if it is actually achieving those non-monetary goals?

Going even further is the concept known as the “triple bottom line” or TBL or 3BL. Writer John Elkington apparently coined the phrase and defined the idea in a 1998 book (Cannibals with Forks) based on a UN idea developed in the late 1980’s. It promotes the idea that corporations might have responsibilities beyond merely their ability to generate monetary value – but in fact should report their cumulative social and environmental impact as well. The trick of course, is once again to agree upon a unit of measure that is as clear and easy to compare as money, for the other two categories.

When you think about it, we already count these values in our current system – or they are “accounted for,” one might say. Companies win informal points for their charitable contributions and support of social institutions – which tend to be non-profit corporations- and those enterprises benefit from the largesse of the for-profit community. Environmental concerns are supposedly monitored by state and Federal environmental protection agencies, and the costs of compliance are built into the cost models for all corporations affected by them.

The discussion becomes more important as corporations grow internationally and take on the scale and influence of countries. The UN does not have a corporate member category – maybe they should. Where corporate priorities differ from governmental priorities there will continue to be increasing friction. And the horse is certainly out of the barn as far as any consideration of throttling back corporate privileges (as opposed to right?), corporate strategies or other boundaries from the US perspective alone. Some of the biggest US corporations are not headquartered here – and if constraints become too onerous – they freely threaten to move elsewhere, taking jobs, tax base, and dependent business communities with them.

So in consideration a re-imagining of capitalism, there is no up-or-down vote on the economic model of capitalism itself. It is not going away because some may indulge in abuse.

Something is not working, however. While the corporation may grind on – the people they were design to derve and support are being commoditized and harmed. Corporations become richer it seems, while our societies and cultures become less so. Is there a model toward which we could move that would bring corporations back into their supporting role for larger concerns of social well-being, and progress? Is there a new twist on the model that could serve all constituencies better?

Is there a reasonable way to re-imagine the capitalism we have come to today?

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2 thoughts on “Reimagining Capitalism”

likely I’ll miss the meeting on the 25th due to my pedicab schedule. But I like this conversation.

We started a site called Here Now and Beyond —-http://herenowandbeyond.org—so as to have a tool for bringing together a gamut of activists and concerned community members.

Except for a lot of my own entries in the Journals section, the site is a blank slate and very low-end in terms of web design. But it’s a start in terms of doing what no one else seems to be doing as of yet : building a site that involves many content creators from a wide variety of types of activism and community/political involvement.

One of our goals is to address the fact that environmental, social justice, and other activist groups seem fragmented and maybe also are reinventing the wheel, so to speak, as a result of not collaborating w/ one another.

Other local blogs focus on specific issues such as local food, community gardening, and so on. And Columbus Underground is, in the final analysis, not a website focused on activism and political involvement—though it has a component of that as the most interactive and user-driven site in this and perhaps many other cities.

And of course, the theme of Columbus Futurist seems amenable to addressing a wide variety of issues. But if you’re interested check the basic framework of Here Now and Beyond outlined as follows : http://abhnb.blogspot.com/

I have repeatedly credited David Staley with putting together the most interesting series of discussions in town. However, it is my sense that David may have allowed me to influence his choice of topics, going back to April meeting, My purpose here is to expand the group’s understanding of how we got to the recent topic, because doing that will, i think help us understand the meaning and significance of both the April topic and the August topic.

For April’s forum, we read Fareed Zaccaria’s essay, ” Are America’s Best Days Behind Us?”, which appeared in TIME Magazine. in the March 7, 2011 issue. In conversation with David, I had described Zaccaria’s essay as “possibly the most important essay published in my lifetime”. I think David agreed that the essay was important, and so agreed to focus the April forum on it. I should note I listen to the world as a political economist, and i had posed a question to Governor Kasich grounded on the writing of Michael Porter under the title, “How to Fix Capitalism”, which appeared in the Jan/FEb 2011 issue of HBR. The title alone made the article seem like mandatory reading, even though the article read as apologia, to my eye. Curiously, there were other related stories popping up. On Marketplace, the April1 episode asked, what if consumers just won’t buy things, and save instead?

Then, after the April forum, still more pertinent pieces appeared. Newsweek’s June 27th issue ran Bill Clnton’s “14 Ways to Save America/s Jobs” , with Clinton himself gracing the cover. The Nation, also on June 27th, ran a cover story “Reimagining Capitalism” which suggested “1 Bold Ideas for a new economy.” And there are others, all along similar vein. I wondered, if it aint broken, maybe all those writers would be writing about something else that is broken, Figuring that all the attention to capitalism might mean that it was indeed broken, I approached David about addressing some part of these articles, and he agreed.

Personally, I don’t think we delved very deeply into the real problems capitalism creates, the contradictions it generate and then displaces in time and space, or what will be required to deal with those that have been displaced into climate change and resource depletion.